SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
0 - 24968
Commission File Number
THE SINGING MACHINE COMPANY, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 95-3795478
(State of Incorporation ) (IRS Employer I.D. No.)
6601 Lyons Road, Building A-7 , Coconut Creek, FL 33073
(Address of principal executive offices )
(954) 596-1000
(Issuer's telephone number, including area code)
Check whether the Issuer: (1) filed all reports required to be
filed by section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports); and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a
court.
Yes x No
APPLICABLE ONLY TO CORPORATE ISSUERS
There were 2,548,500 shares of Common Stock, $.01 par value,
issued and outstanding at June 30, 1999.
<PAGE>
THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1999
(Unaudited) and March 31, 1999.
Consolidated Statement of Operations - Three months
ended June 30, 1999 and 1998 (Unaudited).
Consolidated Statement of Cash Flows - Three months
ended June 30, 1999 and 1998 (Unaudited).
Notes to Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE> 2
THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
Item I. Financial Statements
<PAGE> 3
THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
June 30, March 31,
1999 1999
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 280,447 $ 49,288
Accounts receivable -
net of $19,900 allowance
for doubtful accounts 1,378,096 1,127,970
Due from Officer 134,270 13,880
Inventories - net 633,756 424,806
Prepaid expenses and
other assets 163,878 27,154
Deferred tax asset 170,000 170,000
TOTAL CURRENT ASSETS 2,760,447 1,813,098
PROPERTY & EQUIPMENT - NET 38,193 16,447
OTHER ASSETS
Reorganization intangible - net 537,672 549,790
TOTAL ASSETS $ 3 336,312 $ 2,379,335
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 443,959 $ 830,088
Accrued expenses 101,925 392,926
Notes payable 167,266 63,000
Due to factor 243,480 128,581
TOTAL CURRENT LIABILITIES 956,630 1,414,595
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value,
1,000,000 shares authorized,
issued and outstanding 1,000,000 -
Common stock, $.01 par value -
75,000,000 shares authorized,
2,498,451 issued and
outstanding at June 30, 1999
and March 31, 1999 24,984 24,984
Additional paid in capital 390,600 15,600
Retain earnings (net deficit) 924,156 924,156
Earnings for the period 39,942 -
TOTAL STOCKHOLDERS' EQUITY 2,379,682 964,740
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 3,336,312 $ 2,379,335
</TABLE>
See accompany notes to financial statements.
<PAGE> 4
THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
( Unaudited )
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1999 1998
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES $1,589,713 $1,650,782
COST OF SALES 1,179,579 1,222,331
GROSS PROFIT 410,134 428,451
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 346,549 366,614
INCOME FROM OPERATIONS 63,585 61,837
OTHER INCOME (EXPENSES):
Other income 26,168 -
Interest expense (7,596) (21,679)
Interest income 437 578
Factoring fees (42,652) (15,814)
NET OTHER EXPENSES (23,643) (36,915)
INCOME BEFORE INCOME TAX BENEFIT 39,942 24,922
INCOME TAX BENEFIT (PROVISION) - -
NET INCOME $ 39,942 $ 24,922
NET INCOME PER COMMON SHARE
Basic $ .02 $ .01
Diluted $ .01 $ .01
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
Basic 2,548,500 2,468,066
Diluted 3,312,500 2,468,066
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
( Unaudited )
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1999 1998
<S> <C> <C>
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $(1,105,400) $ 37,704
CASH FLOWS FROM INVESTING ACTIVITIES:
Receivable from related parties 437 578
Computer equipment (19,454) -
Leasehold improvements (3,690) -
Net cash provided by (used in)
investing activities (22,707) 578
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable - related party (120,000) -
Repayment of notes payable (63,000) (40,000)
Proceeds from packing loan -
Belgium Bank - HK 167,266 -
Proceeds from notes payable - 43,000
Issuance of preferred stock 1,375,000 -
Net cash provided by (used in)
financing activities 1,359,266 3,000
INCREASE IN CASH 231,159 41,282
CASH - BEGINNING OF PERIOD 49,288 13,916
CASH - END OF PERIOD $ 280,447 $ 55,198
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of the
Company have been prepared in accordance with the
instructions to Form 10-QSB and, therefore, omit or
condense certain footnotes and other information normally
included in financial statements prepared in accordance
with generally accepted accounting principles. It is
suggested that these consolidated condensed financial
statements should be read in conjunction with the
Company's financial statements and notes thereto
included in the Company's audited financial statements
on Form 10-KSB for the fiscal year ended March 31, 1999.
The accounting policies followed for interim financial
reporting are the same as those disclosed in Note 1 of
the Notes to Financial Statements included in the
Company's audited financial statements for the fiscal
year ended March 31, 1999 which are included in Form 10-
KSB.
In the opinion of management, all adjustments which are
of a normal recurring nature and considered necessary to
present fairly the financial positions, results of
operations, and cash flows for all periods presented have
been made.
The results of operations for the three month period
ended June 30, 1999 are not necessarily indicative of the
results that may be expected for the entire fiscal year
ending March 31, 2000.
The accompanying consolidated condensed financial
statements include the accounts of the Company and its
wholly-owned subsidiary. All significant inter company
balances and transactions have been eliminated. Assets
and liabilities of the foreign subsidiary are translated
at the rate of exchange in effect at the balance sheet
date; income and expenses are translated at the average
rates of exchange prevailing during the year. The
related translation adjustment is not material.
NOTE 2 - REORGANIZATION
On April 1, 1998, the Company effectuated a one-for-ten
(1:10) reverse stock split. The primary purpose of the
<PAGE> 7
NOTE 2 - REORGANIZATION (Cont'd)
reverse stock split was to comply with the Company's Plan
of Reorganization, as Amended, which was confirmed on
March 17, 1998. Trading in the post-split shares
commenced at the opening of business on April 1, 1998.
No additional shares were issued in connection with the
reverse split and those stockholders entitled to receive
fractional shares received shares based on rounding to
the nearest whole number. During April 1998, the Company
filed an amendment to its Articles of Incorporation
increasing the authorized shares of the Company's common
stock to ten million (10,000,000) shares.
The Company's creditors, pursuant to the Company's Plan
of Reorganization, as Amended, who elected to receive
shares were issued an aggregate of 2,180,052 post-split
shares of common stock. The financial statements reflect
the issuance of 2,180,052 post-split shares of common
stock to the Company's creditors.
These financial statements also reflect the one-for-ten
(1:10) reverse stock split in computing the weighted
average common and common equivalent shares outstanding
and the net loss per common share amounts and account for
the subsequent increase of authorized common shares
pursuant to the Company's amendment to its Articles of
Incorporation during April 1998.
NOTE 3 - MAJOR CUSTOMERS
As a percentage of total revenues, the Company's net
sales in the aggregate to its five (5) largest customers
during the quarters ended June 30, 1999 and 1998 were
approximately 94% and 91%, respectively. For the quarter
ending June 30, 1999, three (3) major retailers accounted
for 39%, 32% and 11% each of total revenues. Because of
the seasonality of the Company's sales, these results may
be distorted due to the historically low percentage of
overall sales during the Company's first fiscal quarter
of each year.
NOTE 4 - PRIVATE PLACEMENT OFFERING
On April 1, 1999, the Company issued a Private Placement
Memorandum (the "Memorandum") offering a minimum of 40
Units ($1,100,000) and a maximum of 50 Units
($1,375,000). The purchase price for each Unit was
<PAGE> 8
$27,500. Each Unit consists of 20,000 shares of the
Company's Convertible Preferred Stock ("Preferred Stock")
and 4,000 Common Stock Purchase Warrants ("Warrants").
Each share of Preferred Stock is convertible, at the
option of the Holder, into one (1) share of the Company's
Common Stock at any time after issuance. Each share of
Preferred Stock will automatically convert into one (1)
share of the Company's Common Stock at 5:00 p.m. eastern
time on April 1, 2000, which is one (1) year from the
date of the Memorandum. Each Warrant entitles the Holder
to purchase, at any time during the period commencing
from the date of issuance and ending three (3) years from
the date of the Memorandum, one (1) share of the
Company's Common Stock at a purchase price of $2.00 per
share. Fractional Units could be purchased at the
discretion of the Company.
The Units were being offered only to "accredited
investors" as defined in Rule 501 of Regulation D under
the Securities Act of 1933, as amended (the "Securities
Act"). The Units were offered on a "$1,100,000 minimum -
$1,375,000 maximum" basis pursuant to Rule 506 of
Regulation D under the Securities Act of 1933, as amended
(the "Securities Act"). Purchasers of the Units will
receive securities that are not registered with the
Securities and Exchange Commission (the "Commission") as
a result of this Offering. The Company, however, will
use its best efforts to file a registration statement
with the Commission to register the Company's Common
Stock underlying the securities comprising the Units
within ninety (90) days after the completion of the
Offering. There is no assurance as to when or if the
registration statement will be declared effective by the
Commission. There is no public market for the Units,
Preferred Stock, or the Warrants, and none will develop
as a result of the Offering.
As a result of this Private Placement, fifty (50) units
were sold and $1,375,000 gross funds have been raised.
One million shares of the Company's Convertible Preferred
Stock and 200,000 Common Stock Purchase Warrants were
issued, effective as of the closing date of the Offering,
June 30, 1999.
NOTE 5 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 28, 1999, the Board of Directors of the Company
authorized a loan in the amount of $55,000 to Edward
<PAGE> 9
Steele, the Company's Chairman and Chief Executive
Officer. The proceeds will be used to purchase two (2)
Units of the Company's Private Placement of April 1,
1999. The Note will accrue simple interest at the rate
of nine percent (9%) per annum and be payable in full one
(1) year from the date of execution of the Note. The
Note shall be secured by the securities comprising the
Units.
On June 28, 1999, the Board of Directors of the Company
authorized a loan in the amount of $55,000 to John
Klecha, the Company's Chief Operating Officer and Chief
Financial Officer. The proceeds will be used to purchase
two (2) Units of the Company's Private Placement of April
1, 1999. The Note will accrue simple interest at the
rate of nine percent (9%) per annum and be payable in
full one (1) year from the date of execution of the Note.
The Note shall be secured by the securities comprising
the Units.
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The analysis of the Company's financial condition,
liquidity, capital resources, and results of operations
should be reviewed in conjunction with the accompanying
financial statements, including the notes thereto.
General
The Singing Machine Company Inc., incorporated in
Delaware in 1994, together with its wholly owned
subsidiary, International (SMC) HK, Ltd. (hereafter
referred to as the "Company"), engages in the production
and distribution of karaoke audio software and electronic
recording equipment. The Company's electronic karaoke
machines and audio software products are marketed under
The Singing Machine trademark.
The Company's products are sold throughout the United
States, primarily through department stores, lifestyle
merchants, mass merchandisers, direct mail catalogs and
showrooms, music and record stores, national chains,
specialty stores and warehouse clubs.
The Company's karaoke machines and karaoke software are
currently sold in such retail outlets as Target, Best
Buy, J.C. Penney and Fingerhut.
For the first quarter of fiscal 1999, the Company's net
income was approximately $40,000. The Company's working
capital as of June 30, 1999 was approximately $1,804,000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
REVENUES
Total revenues decreased by approximately $61,000 or 4%
during the first quarter of fiscal 2000 compared to the
first quarter of fiscal 1999. The decrease in revenue is
not significant as historically the Company ships a low
percentage of its total sales during its fiscal first
quarter.
GROSS PROFIT
Gross profit from equipment and music sales decreased
approximately $18,000 to $410,000 or 25.8% for the first
quarter of fiscal 2000, compared to $428,000 or 25.9% for
the first quarter of fiscal 1999. The decrease in gross
profit was a direct result of increased equipment sales
yielding a lower gross profit. Partially offsetting the
decrease was an increase in music sales at a higher gross
profit for the quarter ending June 30, 1999.
<PAGE> 11
SELLING, GENERAL ADMINISTRATIVE EXPENSES
Selling, general & administrative expenses decreased
approximately $20,000 or 5%, during the first quarter of
fiscal 2000 compared to the first quarter of fiscal 1999.
The decrease is primarily due to lower Hong Kong office
expenses resulting from a change of Hong Kong agents.
DEPRECIATION AND AMORTIZATION EXPENSES
Depreciation and amortization expense decreased
approximately $2,000 or 13% to $14,000 for the first
quarter of fiscal 2000 compared to the $16,000 recorded
last year. The decrease is primarily the result of the
write off of the software library during the 1999 fiscal
year. During fiscal year 2000, the software library was
fully amortized.
OTHER EXPENSES
Net interest expense decreased approximately $14,000 or
66% during the first quarter of fiscal 2000 compared to
the same period a year ago. The decrease is primarily due
to decreased banking and interest charges of the
Company's Hong Kong subsidiary to finance increased
shipments of hardware.
Loss on sales of accounts receivable was 2.6% and 1.0% of
total revenues during the first quarter of fiscal 2000
and 1999 respectively. The loss increased $26,800 to
$42,600, compared to the $15,800 recorded last year
primarily due to an increase of invoices factored during
the first quarter of fiscal 2000.
SEASONALITY AND QUARTERLY RESULTS
Historically, the Company's operations have been
seasonal, with the highest net sales occurring in the
second and third quarters (reflecting increased orders
for equipment and music merchandise during the Christmas
selling months) and to a lesser extent the first and
fourth quarters of the fiscal year.
The Company's results of operations may also fluctuate
from quarter to quarter as a result of the amount and
timing of orders placed and shipped to customers, as well
as other factors. The fulfillment of orders can therefore
significantly affect results of operations on a quarter-
to-quarter basis.
FINANCIAL CONDITION
At June 30, 1999, the Company had current assets of
<PAGE> 12
$2,760,447, compared to $1,813,098 at March 31, 1999;
total assets of $3,336,312 as compared to $2,379,335 at
March 31, 1999; current liabilities of $956,630 as
compared to $1,414,595 at March 31, 1999, and a current
net worth of $2,379,682 as compared to $964,740 at March
31, 1999. The increase is primarily due to additional
capital raised through the sale of preferred shares of
the Company's stock by the Private Placement Offering
during the quarter ended June 30, 1999.
CAPITAL RESOURCES
The Company has obtained significant financing for
continuing operations and growth. Four specific lines of
credit have been opened, two financing agreements in Hong
Kong and two financing agreements through its U.S.
operations.
Effective May 19, 1999, the Company, through its Hong
Kong subsidiary, International SMC(HK) Ltd., obtained a
credit facility of (US) $200,000 from Belgian Bank, Hong
Kong, a subsidiary of Generale Bank, Belgium. This
facility is a revolving line based upon drawing down a
maximum of 15% of the value of export letters of credit
lodged with Belgian Bank. There is no expiration except
that Belgian Bank reserves the right to revise the terms
and conditions at the Bank's discretion. The cost of
this credit facility is the U.S. Dollar prime rate plus
1.25%. Repayment of principal plus interest shall be
made upon negotiation of the export letters of credit,
but not later than ninety (90) days after the advance.
Effective July 7, 1999, the Company, through its Hong
Kong subsidiary, International SMC(HK) Ltd., obtained a
credit facility of $300,000 (US) from Hong Kong Bank.
This facility is a revolving line based upon drawing down
a maximum of 15% of the value of export letters of credit
lodged with Hong Kong Bank. There is no expiration
except that Hong Kong Bank reserves the right to revise
the terms and conditions at the Bank's discretion. The
cost of this credit facility is the U.S. dollar prime
rate plus 1.50%. Repayment of principal plus interest
shall be made upon negotiation of the export letters of
credit, but not later than ninety (90) days after the
advance.
The Company is a party to a factoring agreement, dated
June 16, 1999, with Main Factors, Inc. ("Main Factors")
pursuant to which Main Factors purchases certain of the
Company's accounts receivable. Under the agreement, Main
Factors purchases certain selected accounts receivable
from the Company and advances 70% of the face value of
those receivables to the Company. The accounts
<PAGE> 13
receivable are purchased by Main Factors without recourse
and Main Factors therefore performs an intensive credit
review prior to purchase the receivable. The factoring
agreement is personally guaranteed by John Klecha, the
Company's Chief Operating Officer and Chief Financial
Officer.
The Company is charged a fixed percentage fee of the
invoice. The purchase of receivables of the Company by
Main Factors is absolute and is a true sale of
receivables. Main Factors has placed no maximum limit on
the amount of the Company's receivables they will
purchase.
The Company has also entered into an agreement with EPK
Financial Corporation ("EPK") whereby EPK will open
letters of credit with the Company's factories to import
inventory for distribution to the Company's customers.
This allows the Company to purchase domestic hardware
inventory for distribution to customers in less than
container load quantities and provides the flexibility to
customers of not opening a letter of credit in favor of
the Company. The selling price to these customers is
considerably higher because the Company pays financing
costs to EPK and incurs costs of ocean freight, duty, and
handling charges. Upon shipment of product from these
financed transactions, the receivables are factored by
Berkshire Financial, thereby buying the shipments and
related interest from EPK.
The Company pays EPK a flat fee per transaction, which is
negotiated for each shipment, and the maximum purchase
price per transaction is $1,000,000. There has been no
maximum total shipments established under this agreement.
Main Factors has entered into this agreement as a third
party agreeing to purchase all receivables invoiced under
these transactions. The transactions financed by EPK are
supported by personal guarantees of Edward Steele, the
Company's Chairman and Chief Executive Officer and John
Klecha, the Company's Chief Operating Officer, and Chief
Financial Officer. The agreement is in effect until July
1, 2001, unless terminated by either party upon thirty
(30) days written notice.
The Company has no present commitment that is likely to
result in its liquidity increasing or decreasing in any
material way. In addition, the Company knows of no
trend, additional demand, event or uncertainty that will
result in, or that are reasonably likely to result in,
the Company's liquidity increasing or decreasing in any
material way.
<PAGE> 14
The Company has no material commitments for capital
expenditures. The Company knows of no material trends,
favorable or unfavorable, in the Company's capital
resources. The Company has no additional outstanding
credit lines or credit commitments in place and has no
additional current need for financial credit.
YEAR 2000
Management has compiled a list of both internally and
externally supplied information systems that utilize
imbedded date codes which could experience operational
difficulties in the year 2000. The Company uses third
party applications or suppliers for all high level
systems and reporting. These systems will either be
upgraded and tested to be in compliance for the year 2000
or the Company will take necessary steps to replace the
supplier. Management is testing new systems for which it
is responsible. It is the Company's objective to be in
year 2000 compliance for all systems by the end of fiscal
1999, however, no assurance can be given that such
objective will be met.
<PAGE> 15
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On or about November 24, 1998, the Company was named as
a defendant for allegedly infringing upon patents for
tape decks owned by Tanashin Denki Co., Ltd.
("Tanashin"), a Japanese manufacturing concern. The
Company was one of multiple defendants named in the suit
filed in the United States District Court for the Eastern
District of Virginia. The case has been transferred to
the U.S. District Court for the Southern District of
Florida, Miami Division. The Company is a co-defendant
with Memcorp, from whom the Company purchases the product
which is the subject of the alleged infringement.
Tanashin alleges damages of approximately $100,000, of
which a maximum of $50,000 would be attributable to the
Company. However, the Company has viable defenses to the
Tanashin claims. Additionally, the Company may have
rights of indemnification from Memcorp pursuant to an
agreement between the companies. The Company believes
that an adverse adjudication would not have a material
affect upon the Company's operations.
Item 2. CHANGES IN SECURITIES
On April 1, 1999, the Company issued a Private Placement
Memorandum (the "Memorandum") offering a minimum of 40
Units ($1,100,000) and a maximum of 50 Units
($1,375,000). The purchase price for each Unit was
$27,500. Each Unit consists of 20,000 shares of the
Company's Convertible Preferred Stock ("Preferred Stock")
and 4,000 Common Stock Purchase Warrants ("Warrants").
Each share of Preferred Stock is convertible, at the
option of the Holder, into one (1) share of the Company's
Common Stock at any time after issuance. Each share of
Preferred Stock will automatically convert into one (1)
share of the Company's Common Stock at 5:00 p.m. eastern
time on April 1, 2000, which is one (1) year from the
date of the Memorandum. Each Warrant entitles the Holder
to purchase, at any time during the period commencing
from the date of issuance and ending three (3) years from
the date of the Memorandum, one (1) share of the
Company's Common Stock at a purchase price of $2.00 per
share. Fractional Units could be purchased at the
discretion of the Company.
The Units were being offered only to "accredited
investors" as defined in Rule 501 of Regulation D under
the Securities Act of 1933, as amended (the "Securities
Act"). The Units were offered on a "$1,100,000 minimum -
$1,375,000 maximum" basis pursuant to Rule 506 of
<PAGE> 16
Regulation D under the Securities Act of 1933, as amended
(the "Securities Act"). Purchasers of the Units will
receive securities that are not registered with the
Securities and Exchange Commission (the "Commission") as
a result of this Offering. The Company, however, will
use its best efforts to file a registration statement
with the Commission to register the Company's Common
Stock underlying the securities comprising the Units
within ninety (90) days after the completion of the
Offering. There is no assurance as to when or if the
registration statement will be declared effective by the
Commission. There is no public market for the Units,
Preferred Stock, or the Warrants, and none will develop
as a result of the Offering.
As a result of this Private Placement, fifty (50) units
were sold and $1,375,000 gross funds have been raised.
One million shares of the Company's Convertible Preferred
Stock and 200,000 Common Stock Purchase Warrants were
issued, effective as of the closing date of the Offering,
June 30, 1999.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Not applicable
Item 5. OTHER INFORMATION
On June 28, 1999, the Company appointed John Klecha as
Chief Operating Officer. In addition to his new duties
as Chief Operating Officer, Mr. Klecha will retain his
title as the Company's Chief Financial Officer.
On June 28, 1999, the Board of Directors of the Company
authorized the Company to issue to John Klecha 150,000
shares of the Company's Common stock in consideration for
his personal guaranty of the Company's credit facilities
provided by Main Factors, Inc. and EPK Financial
Corporation. The shares will be restricted under the
Securities Act of 1933, as Amended. (See: "Capital
Resources").
On June 28, 1999, the Board of Directors of the Company
authorized the Company to issue to Edward Steele 200,000
shares of the Company's Common stock in consideration for
his personal guaranty of the Company's credit facilities
provided by EPK Financial Corporation. The shares will
be restricted under the Securities Act of 1933, as
Amended. (See: "Capital Resources").
<PAGE> 17
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no exhibits required to be filed for the
period covered by this Report.
(b) The Company filed a Current Report on Form 8-K
dated May 19, 1999.
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THE SINGING MACHINE COMPANY, INC.
Dated: August 31, 1999 By:/s/ John F. Klecha
John F. Klecha
Chief Financial Officer
<PAGE> 19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statements of Cash Flows and Notes thereto
incorporated in Part I, Item 1. of this Form 10-Q and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 280,447
<SECURITIES> 0
<RECEIVABLES> 1,378,096
<ALLOWANCES> 19,900
<INVENTORY> 633,756
<CURRENT-ASSETS> 2,720,447
<PP&E> 38,193
<DEPRECIATION> 1,398
<TOTAL-ASSETS> 3,336,312
<CURRENT-LIABILITIES> 956,630
<BONDS> 0
0
0
<COMMON> 24,984
<OTHER-SE> 2,379,682
<TOTAL-LIABILITY-AND-EQUITY> 3,336,312
<SALES> 1,589,713
<TOTAL-REVENUES> 1,615,881
<CGS> 1,179,579
<TOTAL-COSTS> 1,549,771
<OTHER-EXPENSES> 42,215
<LOSS-PROVISION> 0
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<EPS-BASIC> .02
<EPS-DILUTED> .01
</TABLE>
